Follow money straight into private equity

Wall Street’s top brass spent months grousing about how they were struggling in the war for talent before doling out the biggest bonuses in years. Goldman Sachs Group Inc just lost another top dealmaker to private equity, with Jennifer Davis moving to Bain Capital. Now, fresh data on pay at big private-equity firms appear to justify the banks’ complaints — though under the surface things aren’t so clear cut.
The biggest listed private-equity firms — Blackstone Inc, Apollo Global Management, Ares Management Corp, Carlyle Group Inc and KKR & Co — paid average compensation per employee just shy of $2 million for 2021. In comparison, the average pay at the five biggest US investment banks was a miserly $232,000.
In executive suites, the differences are greater. The 2021 pay of Blackstone co-founder Stephen Schwarzman hasn’t been published yet, but there’s a fair chance it’ll outstrip the $611 million he got for 2020 — of which $524 million was dividends on his Blackstone shares. Goldman Chief Executive Officer David Solomon and Jamie Dimon, his counterpart at JPMorgan Chase & Co, each got about $35 million. Whether the elbow grease and know-how of Schwarzman is really worth so many Solomons or Dimons I won’t attempt to answer here.
But the truth is that the average pay for private-equity people, first reported in the Financial Times, isn’t a good comparison with the average pay at banks.
The first thing to note is that 2021 was a big year for private-equity pay – unusually big. At Ares, 2021 pay was 1.7-times the previous year; at Apollo and Blackstone it was about 2.7 times bigger. And at all these firms for which the numbers have been reported consistently, pay in 2021 was mostly more than 1.5-times larger than any of the previous five years.
Also, a lot of this money is shared profits on investments or carried interest, some of which is only paper profits until a fund has been fully wound up and all the profits returned to its investors.

—Bloomberg